SBP to intervene to support rupee

The State Bank of Pakistan (SBP) on Monday decided to intervene in the open currency market to arrest the continuing depreciation of rupee against US dollar. The State Bank also assured the exchange companies about supply of dollars as per their demand.
Following a massive depreciation of rupee on open market, SBP called an emergency meeting of Exchange Companies on Monday to take some measures to arrest the slide of PKR against the greenback. The meeting was chaired by Ali Sultan, Director, Exchange Policy Department of SBP, and was attended by Malik Bostan and Haji Haroon of Exchange Companies Association of Pakistan (ECAP). The greenback crossed Rs 90 on Monday and closed at Rs 90.30 against dollar, while during last one week the rupee had devalued by Rs 2.50 to Rs 90.30 to dollar. Continuous devaluation of rupee forced the regulator (SBP) to intervene and take some steps.
During the meeting, SBP expressed serious concern over rupee devolution and detailed discussion was made. In addition, several steps were also discussed to restrain the fall in rupee value. The SBP also announced to provide maximum support to the exchange companies to manage supply of US dollars.
It was decided that State Bank will supply dollars to the exchange companies as per their demand to manage the supply and demand gap in the open market. Sources said it was also decided to intervention will be made through National Exchange Company of National Bank and Habib Exchange Company of Habib Bank, as other exchange companies had bad experience in the past.
In the past, SBP supplied dollars to support rupee. However, later, FIA conducted inquiries, still in process. Therefore, exchange companies were reluctant to take direct supply from the central bank, sources said. SBP offered to supply dollar at Rs 88.50, which was refused by the exchange companies and they asked for supply of dollar Rs 89.50 to the dollar. However, the rate was not decided during the meeting. The companies asked SBP that they will not take delivery of dollar at Rs 88.50.
"We have informed the SBP officials that there are many reasons of decline in rupee value and these include ongoing tussle between Pakistan and US, fall in gold prices, and closure of old Rs 500 notes," said Malik Bostan. Open currency market needs a supply of 10 million dollars per day. However, during the current situation, when dollar demand is on higher side, there is a gap of about two million dollars in supply and demand. Therefore, the some pressure is being seen on rupee in open market, he added. He said that ECAP along with SBP is taking several measurers to restrain rupee at its previous level and in this regard SBP has assured supply of dollar as per demand of open market.
"We are confident that during the next few days with the support of SBP, dollar will decline and rupee will appreciate", Bostan said. He said that current increase in dollar price was temporary and cautioned that speculators and investors would suffer loss as dollar would be at Rs 88 in the next few days.